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Monday
Aug082011

SEC Sues Estate of Deceased Houston Money Manager

The Securities and Exchange Commission ("SEC") charged  two Houston money management firms and their founders with operating a Ponzi scheme that allegedly took in over $50 million from investors, including nearly $8 million from at least 13 prominent college basketball coaches.  In a complaint filed August 1st, the SEC charged Select Asset Management, J. David Financial, Brian A. Bjork, and the Estate of Joel David Salinas with various securities law violations and sought an asset freeze during the pendency of the investigation.  As recently covered by Ponzitracker, Salinas committed suicide shortly after being interviewed by the SEC for his involvement in the scheme.  Salinas had gained fame for founding the Houston Select summer basketball program which became known in basketball circles for attracting a high caliber of attendees.  Many former and current NCAA basketball coaches are reported to having invested with Salinas.

According to the SEC's complaint, Brian A. Bjork and Salinas formed Select Asset Management and J. David Financial to orchestrate two fraudulent offerings of securities from at least 2004 until the present.  In the first scheme, over 100 investors purchased approximately $39 million in corporate bonds offering annual yields up to 9%.  Investors believed they were purchasing bond offerings of large US companies, including Ford and IBM, and were provided with monthly account statements reflecting such holdings.  In reality, these bonds were never purchased or retained by J. David Financial or Select Asset Management.  Instead, investor funds were commingled and used to pay fictitious coupon interest payments to older investors.

The second scheme involved the offering of securities in the form of units of membership interests issued by two private funds managed by Select Capital Management.  According to Private Placement Memorandums issued by the two funds, the Funds intended to build a commercial-loan portfolio by originating short-term commercial loans, purchasing loan participations and syndications, and investing in commercial-loan funds.  The SEC alleged that two offerings were held from August 2007 to December 2010, in which nearly $14 million was raised from over 50 investors.  

According to Bloomberg, a note purporting to be from Salinas was found during a search of his office claiming sole responsibility for the crimes.

A hearing is set before United States District Judge Keith P. Ellison on August 10th.  

A copy of the SEC Complaint is here.